How Europe

Came Back

from the Brink

Paris, Vienna, Barcelona, Berlin, and London are the most popular destinations for European association events, and the combined whole of Europe completely outpaces the United States when it comes to the total number of meetings held each year.

The proliferation of lost-cost airline options, along with the ability of European citizens to travel freely between member states of the Eurozone, has brought into focus a new era for the European meetings industry. Secondary cities, like Hamburg or Manchester, are holding giant meetings drawing visitors f rom across Europe and the world. Lower costs in Eastern Europe, as well, are making countries like Croatia more attractive for conferences that would usually hit Berlin or Paris.

A wide resurgence of economic growth in the areas of construction, pharmaceutical industry, and information technology spending has touched off extreme growth in the number of events across the continent, even in countries whose growth had been slowed by years of austerity policies.

Cities across Europe are working to improve their convention centers and meetings spaces in order to stand out among increased competition. As businesspeople from China and other Asian nations travel outward, as well, Europe is a more likely landing spot for meetings than the U.S. due to shorter flight times and proximity to the Middle East and Africa.

There’s also the reality that concerns about travel to the U.S. have helped fuel increased meetings activity in Europe over the last year; while international meetings attendees in the U.S. haven’t decreased precipitously, more high-spending Europeans are likely attending events in the Eurozone instead.

In a boom time for European events, destinations are doing everything they can to stand out.

Potential is the key thing to remember. Despite the hype surrounding bitcoin and other cryptocurrencies — all of which utilize blockchain — its use is still limited and the problem at the moment is charlatans and snake-oil salesmen have hijacked the term, prompting something of a backlash.

The idea behind blockchain is fairly simple: moving from a centralized system to a decentralized one where there are no information gatekeepers and all computers participating in the shared network can access the database. Plenty of people think the travel industry is ripe for this new type of disruption.

One of the big debates within the blockchain community is about the value of private versus public. There is a strand of libertarianism that underpins blockchain, the need to free information from the power of governments or corporations. The problem is big businesses have decided they can harness the power of blockchain for themselves, and in travel, there have been a number of early movers.

Tourism company TUI Group, which includes airlines, cruise companies, and tour operators, has dipped its toe in the water with a private blockchain for its hotel portfolio.

Meanwhile, B2B player travel technology provider Amadeus is doing its own exploratory work. Decius Valmorbida, the firm’s senior vice president of travel channels, sees blockchain as “more a technology that we can use rather than something that will replace what we do.”

This is where the tension is going to rise over the coming years between established players who want to use blockchain for their own needs, while maintaining control, and purists who see blockchain as the beginning of a new era.

“A lot of people who were planning to go to Europe are going to the Caribbean and Alaska,” Michael Bayley, president and CEO of Royal Caribbean International, said that May.

Plenty of people were still cruising in Europe. But many of those passengers were from Europe, and operators based in the U.S. complained that they didn't pay top dollar for their trips or spend as much on board. While travelers weren’t necessarily canceling trips already scheduled, new bookings for future trips in the region were more difficult to lock down.

“There’s been no healing process in this environment because it’s one after the other after the other after the other,” said Norwegian Cruise Line Holdings President and CEO Frank Del Rio in August 2016. “When will it stop? Anyone’s guess. We’re assuming that whatever environment we have today continues into the booking period into 2017.”

Cruise lines trimmed their capacity for the Mediterranean, driving down the total number of passengers who could take a cruise there in 2017. But North Americans were eager to take the voyages that were available — especially in Northern Europe — and to start booking future trips again, with cruise executives reporting higher occupancy, prices, and future demand. Improving economies, stable air travel prices, fewer security incidents, and pent-up demand were all factors driving the improvement in Europe.

The desire for European cruises was still robust as 2018 kicked off. As Bayley said recently: "It came back last year; it's looking good this year."

In February, Del Rio, whose company owns Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises, called the shift in demand for Europe trips "unprecedented."

"The strength and speed of this turnaround was faster than anticipated, taking only one year for European itinerary pricing to recover and surpass 2015 prior peak levels," he said during a call with analysts.

A Travel Leaders Group survey released in March showed that 41 percent of respondents who book Mediterranean cruises said they had seen an increase in those itineraries compared to the previous year.

Conversation during recent earnings calls has turned to higher-yielding parts of the Eastern Mediterranean that cruise lines have avoided in recent years, including Turkey.

"We would love to have them back," said Arnold Donald, president and CEO of Carnival Corp., which owns nine North American and European cruise brands. "At this point in time, we just have to monitor and see what happens. The world is a volatile and ever-changing place, and in the end we take guests where they are willing to go and they want to go. We are cautiously optimistic, but don’t feel comfortable predicting at this point."

It was the fifth straight year that international arrivals — which rose 8.9 percent year-over-year to reach 82 million — broke all previously standing records.

Catalonia remains Spain’s most-visited region despite a late August 2017 terrorist attack that left 16 dead and 100 injured at Barcelona’s most famous tourist destination, the sprawling and perpetually crowded Las Ramblas. This was followed in October with weeks of traffic-stopping protest, police violence, and cacophonous cassoladas as Catalan separatists (illegally) declared independence from Spain.

As the city’s largest banks and businesses began relocating to Madrid, the economy marched on in Catalonia and beyond with tourist spend growing 12.4 percent year-on-year to reach another new record.

Tourists arriving in search of vino tinto and sunshine made Spain the second most profitable destination in terms of total foreign tourist spend in 2016 with a total contribution of 158.9 billion euros and 862,000 jobs — both of which were expected to continue growing in 2017. Tourism accounts for 11 percent of the economy in Spain.

Proof of Spain’s growing appeal with a new generation of travelers can be found on social media. Barcelona is the third most photographed European city on Instagram with 34.9 million images, coming in behind only London and Paris, according to recent analysis by Hertz.

The Catalans’ combat for independence has become fodder for interesting dinner conversation but has not (yet) impacted tourists’ idyllic perception of Spain.

The country is proving that sociopolitical and economic troubles won’t necessarily deter visitors as long as the destination’s reputation for perennial sunshine, world- renowned culture, delicious food — and most importantly safety — remains.

The market has shifted, though, and barring a complete failure of the Gulf trio, the major European airline companies — International Airlines Group, Air France-KLM, and Lufthansa Group — probably won’t regain that traffic. But for the most part, they have accepted the new normal. And unlike their U.S. counterparts, European airlines have learned to coexist with Emirates, Etihad, and Qatar.

Part of the reason is financial. Qatar Airways owns 20 percent of IAG, and British Airways and Qatar have a joint business agreement, sharing revenue and cooperating on schedules and pricing on many long-haul routes. U.S. airlines have no similar ties with Gulf carriers, and recently American Airlines executives reacted angrily after learning Qatar wanted to buy some of its stock. Eventually, Qatar decided not to buy a stake.

The other European airlines don’t have such close connections with Gulf carriers. But last year, Lufthansa and Etihad agreed to a $100 million global catering agreement and a memorandum of understanding to cooperate on aircraft maintenance, repair, and overhaul.

There are other factors, too. The Gulf carriers are strong in Europe, but they have sometimes failed when straying from their core business. Etihad had a massive flop when it invested in Air Berlin and Alitalia, pumping cash into both airlines until walking away in 2017. Indirectly, Etihad’s struggles helped Europe’s leading airlines, allowing them to compete against weakened competitors in Berlin and Rome, rather than EasyJet or Ryanair.

European airlines also have less concern about Gulf carriers for another reason — they’re not as irritated about f ifth-f reedom flights. U.S. carriers have been annoyed when Emirates begins new U.S.-European nonstops, such as Athens to Newark, which they’re permitted to fly under Open Skies agreements.

European carriers may not love the routes either, but they’re a bigger threat to U.S. airlines, who usually defend hubs, such as United’s in Newark, at all costs. The Gulf carriers haven’t launched transatlantic flights f rom London, Paris, Amsterdam, Munich, or Frankfurt, and they probably won’t, insulating European airlines from some of this drama.

There are a number of factors that account for the growing popularity of places like Prague and Budapest, but probably one that doesn’t get its due is membership in the European Union. It’s hard to quantify all the ways that EU membership has juiced visitor numbers, but one need look no further than opening up borders, smoothing out international airline, booking, and banking transactions, and stabilizing currencies.

It’s perhaps ironic, then, that some of the countries that have benef itted the most f rom the growing tourism numbers – including Hungary, Poland, and the Czech Republic – in recent years have also become the most xenophobic in their own domestic politics. Regional leaders, such as Hungarian Prime Minister Viktor Orbán or Czech President Miloš Zeman, regularly rail against the EU and demonize what they consider to be the many negative outside influences EU membership has brought – though they normally stop short of criticizing the tourism industry directly.

It’s unlikely the recent political direction these countries have taken will have a direct impact on tourism numbers – at least in the short term. Visitors continue to stumble through the “old towns” of Prague and Krakow, or sail through Budapest on the Danube, with nary a thought for the countries’ governments. But that could change. Poland’s decision in February to, in effect, censor discussion of the Holocaust generated heaps of bad publicity.

And there’s now a lot more at stake. Tourism in cities like Prague, for example, now accounts for at least one in 10 jobs in the city.